Lufthansa Cuts First Class Seats, Ousts Air-Miles Hunters

Chief Executive Officer Christoph Franz, who leaves Lufthansa next year to become chairman of Swiss drugmaker Roche Holding AG, said he was “surprised” by the rapid success of the revamp and parallel efforts to stimulate demand. “Hopefully we can continue in the same direction in the next two years,” he said. Photographer: Ralph Orlowski/Bloomberg

Nov. 15 (Bloomberg) -- Deutsche Lufthansa AG said sales of
first-class tickets have risen more than 10 percent following a
revamp of its premium cabins and efforts to fill seats with
paying customers rather than passengers burning air miles.

The trimming of first-class routes to focus on the
strongest markets, coupled with cheaper but less flexible fares
aimed at wealthy leisure travelers, has also spurred uptake of
the premium product, Jens Bischof, sales chief for Lufthansa’s
main brand, said in an interview at the carrier’s Frankfurt hub.

“There’s good demand and it’s very robust, not just a
marketing peak,” Bischof said. “We try not to fill first at
any price. It’s an exclusive, innovative product.”

Lufthansa has decided to remove first-class cabins from
one-third of its long-haul aircraft, with the remaining 70
planes receiving an upgrade that includes more comfortable seats
fitted with thicker mattresses and a more elaborate culinary
offering. About 60 of the jetliners due for the refit have
already been overhauled, driving the sales gain, Bischof said.

Lufthansa’s repositioning of its premium offering comes as
Gulf carriers led by Dubai-based Emirates lure affluent long-haul passengers with scores of new wide-body aircraft. Its plan
will see older Airbus SAS A340 and Boeing Co. 747 wide-bodies
cut to two classes, while some new planes will have four cabin
options as premium-economy berths are added for the first time.

‘Upgrade Class’

The German carrier’s reduced-price, leisure-oriented
offering knocks about 40 percent off the price of a first-class
seat for travel to about 30 destinations, Bischof said.

Lufthansa was selling first-class tickets from Frankfurt to
Bangkok in January for 4,299 euros ($5,785) this week, less than
fully flexible business-class seats cost. With a 400-euro fee
for cancellations, the fares are ill-suited to an unpredictable
schedule, and so won’t hurt lucrative corporate sales.

Chief Executive Officer Christoph Franz said separately
that Lufthansa may have stuck with a comprehensive first-class
network for too long, and that the product risked becoming “an
upgrade class” for people redeeming frequent flyer points.

“For an entire product class to be more or less serving as
a mile-burning product, that’s not the right thing,” the CEO
said in an interview in New York on Nov. 6. “It’s a top-notch
luxury product. We want to have passengers essentially for first
class, with a few upgrades.”

Yield Pressure

Lufthansa typically carries 200,000 passengers a day -- of
whom only 700 travel first class, catered to by 1,500 dedicated
flight attendants. It also last year tightened rules to bar most
employees from flying first class on business-related trips.

Franz, who leaves Lufthansa next year to become chairman of
Swiss drugmaker Roche Holding AG, said he was “surprised” by
the rapid success of the revamp and parallel efforts to
stimulate demand. “Hopefully we can continue in the same
direction in the next two years,” he said.

Improved first-class bookings haven’t on their own been
enough to reverse a trend of falling yields, a measure linked to
average fares. Yields declined 3.1 percent in the third quarter,
Lufthansa said on Oct. 31, accelerating from a 2.5 percent drop
in the previous three months, with the slide blamed on adverse
currency effects and the addition of more economy-class seats.

Five-Star Goal

Bischof said there’s no trend away from first-class travel
to business jets, a service Lufthansa offers in partnership with
Warren Buffett’s NetJets Inc., which supplies the planes.

The airline operates more than 1,000 private jet flights a
year, with about one-third of its customers also booking a first
class ticket. “There is no cannibalization,” Bischof said.

While Lufthansa doesn’t break down sales for first class,
the share of premium revenue on long-haul flights, including
business berths, was 47 percent for the first nine months, the
lowest proportion in 4 years. That revenue is generated from
just 20 percent of customers, Bischof said.

Lufthansa, which has orders for 295 new planes, aims to
become the first western airline to receive a five-star rating
from airline-review firm Skytrax by 2015, having already been
awarded that rank for its first-class service.